Interpreting the networks (cont'd)

Economics has always been a network study in essence, directly or indirectly related to network science. Economies have always been boosted by network expansions or improvements, in geographical discovery, in regional commerce, in transport efficiency, in communication, and in the financial systems that have over time evolved.

There have been periods of network disruption, such as in times of war, though these were seen to be more truly network transformations once the dust had settled. It’s also possible that such historic periods were triggered by network breakages or changes, rather than the other way around. The subject is complex, books have been written.

In the case of the present-day pandemic, there is a purposeful and global effort underway to disrupt the economic network on multiple levels. The reasoning is fundamentally sound, and the blueprint is expected to be temporary. The effect, however, is not predictable, in the economic or the globally behavioral sense, which are connected.

Networks are like organisms, even (or especially) the massive digital kind, which grow or shrink or change or otherwise react quickly. These are all complex multi-dimensional bodies that like biological systems may or may not respond to outside interference in known ways. Medicines, which may or may not work, usually if not always come with side effects, sometimes if not usually unexpected.

Markets (commercial and financial) are network systems, which in the past decade have become dominated by underlying networks in the field. In commerce, we recognize these best as the Big 5 (Apple, Google, Microsoft, Amazon, Facebook), but there are many others – internationally, domestically, locally – that have either been influenced or inspired by, dependent on, reacting to, the same technological and behavioral patterns that have birthed these giants.

Networks don’t easily break, even when forced to, but they do evolve. The former is an absolute, the latter is relative. In financial markets, multiple networks intersect and overlap – the money flows, the companies, the governing bodies, the messaging – which makes the real-time analysis exponentially more difficult.

But not impossible…

At least it’s not impossible to start, to watch the giants and the systems and to look for early signs. Not necessarily financially, although perhaps that too, but directionally, which relates to finance in the long-term anyway.

Someday, you know, this war is going to end. Related reading from a different time: Interpreting the networks.